For anyone that lives in Australia you will be very familiar with the Big 4 Banks, commonly called the Big 4. They are Commonwealth Bank (CBA), Westpac Bank (WBC), National Australia Bank (NAB) and Australia and New Zealand Banking Group (ANZ). These 4 banks hold the majority of banking within Australia and apparently hold close to 80% of all home loans within Australia.
Analysis
The results listed above are all from the Big 4 Bank’s half yearly reports released recently. While all care was taken to compare the information, please note that I am not a professional and there may be some information I have missed or misinterpreted. Please take these results with a grain of salt.
Market Cap
As seen in the table, CBA has a market cap that is nearly twice the size of the other banks. The other three banks, Westpac, NAB and ANZ are very similar in size and are a lot easier to compare to each other. These are listed in order from left to right, from largest to smallest market cap.
Price to Earnings Ratio
On a price/earnings ratio, we can see that CBA is the “cheapest” with ANZ closely followed by and then NAB and WBC following them as more “expensive” shares respectively. While PE ratio is not the best way to analyse a company, for something that is a pretty straight forward business with limited growth I think this is a clear indicator for defensive stocks like these that some are probably still a little too expensive for me.
Dividends
As can be seen above, Commonwealth Bank is the only bank to continue paying a dividend within the range that it typically pays. This is due to the earnings per share being a lot higher than the other shares and with limited write downs and impairments like the other 3 banks have stated. This is still a 79% payout ratio which is still on the higher end but to be expected for something like banking shares.
Westpac has halted their dividend until later, a “suspended dividend” as they have called it. Down from $0.94 per share last interim dividend.
NAB have decided to continue to pay a dividend, albeit, a reduced dividend. In 2018 the dividends were paid out at $0.99 per share, twice a year. It was reduced in $0.83 a share twice a year and now the interim dividend has been reduced again to $0.30 per share.
ANZ have also suspended their interim dividend. This time last year they paid an $0.80 per share dividend.
Net Interest Margin
This is one of the best indicators for a bank. It compares the interest coming in from products like loans and mortgages compared to the interest going out. The higher the Net Interest Margin (NIM) the more money the banks can make, but this has a downfall as the other banks can offer a lower NIM and gain customers. With a healthy business comes a healthy NIM. This is also influenced by the RBA cash rate.
We can see that currently Westpac reports to have the best NIM, with CBA following closely behind. NAB and ANZ are quite far behind the other two competitors.
Disclaimer
The information in this article is for general purposes only and should not be considered as advice to any persons. No monies should be invested based on what is contained in this article. I do not currently own any of the banks directly, but I do own them indirectly via ETF’s and LIC’s (ASX:CBA ASX:WBC ASX:NAB ASX:ANZ) at time of writing this article.
